TMI Blog2014 (6) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the person who had the primarily liability to pay tax, and it is only when the primary liability is not discharged that vicarious recovery liability can be invoked. Once all the details of the persons to whom payments have been made are on record, it is for the Assessing Officer, who has all the powers to requisition the information from such payers and from the income tax authorities, to ascertain whether or not taxes have been paid by the persons in receipt of the amounts from which taxes have not been withheld. So far as penal provisions are concerned, the penalty is for lapse on the part of the assessee and it has nothing to do with whether or not the taxes were ultimately recovered through other means. The provisions regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey, for examining compliance with tax withholding obligations, by the income tax authorities. During the course of this survey, it was noticed that the assessee has not complied with tax deduction at source obligations inasmuch as taxes were not properly withheld in respect of interest on certain deposits placed by the customers with the assessee. It was in this backdrop that the demands under section 201(1), in respect of non deduction of tax at source, and under section 201(1A), in respect of delay in depositing the tax the assessee ought to have withheld, were raised on the assessee. Aggrieved, assessee carried the matter in appeal but without any success. The assessee is not satisfied and is in appeal before us. 3. There are many oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y such tax directly. Thus, to declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that assessee has also failed to pay tax directly. The fact that assessee has failed to pay tax directly is thus, foundational and jurisdictional fact and only after finding that assessee has failed to pay tax directly, deductor can be deemed to be an assessee in default in respect of such tax .. 6. It is thus clear that the onus is on the revenue to demonstrate that the taxes have not been recovered from the person who had the primarily liability to pay tax, and it is only when the primary liability is not discharged that vicarious recovery liability can be invoked. Once all the details of the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequences - penal provisions, interest provisions and recovery provisions. The penal provisions in respect of such a lapse are set out in Section 271 C. So far as penal provisions are concerned, the penalty is for lapse on the part of the assessee and it has nothing to do with whether or not the taxes were ultimately recovered through other means. The provisions regarding interest in delay in depositing the taxes are set out in Section 201(1A). These provisions provide that for any delay in recovery of such taxes is to be compensated by the levy of interest. As far as recovery provisions are concerned, these provisions are set out in Section 201(1) which seeks to make good any loss to revenue on account of lapse by the assessee tax deductor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompensatory interest in nature and it seeks to compensate the revenue for delay in realization of taxes. Hon'ble Bombay High Court, in the case of Bennett Coleman Co Ltd. v. ITO (157 ITR 812) has held so. Therefore, levy of interest under section 201(1A) is applicable whether or not the assessee was at fault. 9. However, since it is only compensatory in nature it is applicable for the period of the date on which tax was required to be deducted till the date when tax was eventually paid. However, in a case in which the recipient of income had no tax liability embedded in such payments, there will obviously be no question of delay in realization of taxes and the provisions of section 201(1A) will not come into play at all. The comput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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